Investors dump Macau stocks on talk of cash policy

Analysts see minimal impact from proposal to require travellers to declare their cash on entry

PUBLISHED : Wednesday, 10 July, 2013, 12:00am
UPDATED : Wednesday, 10 July, 2013, 4:38am

Shares in Macau gaming operators were hit yesterday following news that the city is considering a system that requires travellers to declare the cash on them on arrival.

Financial Intelligence Office director Deborah Ng Man Seong told Portuguese-language news agency Lusa last week about the plan, which was picked up by English-language news services yesterday. They reported her as saying: "No time frame, declaration threshold or penalties have been determined yet at the present stage."

The office sets anti-money-laundering guidelines for the world's largest gaming hub.

At present, travellers do not need to declare the cash they carry into Macau and there is no limit to the amount they can take. Beijing, however, prohibited people from leaving the mainland with more than 20,000 yuan (HK$25,066), or US$5,000 in foreign currency, when travelling abroad, said Aaron Fischer, the head of consumer and gaming research at CLSA.

"The aforementioned policy is still in the early stages of discussion and there is no concrete time frame for execution, but the news is still likely to affect investor sentiment," said Fischer.

Shares in Galaxy Entertainment fell 3.8 per cent yesterday to HK$35.55 while SJM, Asia's biggest casino operator by revenue, dropped 3 per cent to HK$17.54 and Melco Crown Entertainment lost 0.7 per cent. The benchmark Hang Seng Index gained 0.5 per cent on the day.

Fischer said the VIP segment, which accounts for 70 per cent of Macau's gaming revenue, was unlikely to be dented by "the rumoured new policy" as the players relied on junket operators for credit to make big bets.

He said the mass market might feel some "minor impact" but "there are still various ways that gamblers can withdraw cash in Macau", such as using cash machines to withdraw up to 10,000 yuan per card per day or buying luxury goods at pawn shops using UnionPay and then reselling them immediately for cash.

"The bottom-line conclusion is that gaming stocks are likely to be affected today but the actual impact on gaming revenues is likely to be minimal," Fischer said.

Grant Govertsen, lead analyst at Macau-based Union Gaming Research, said he was not too worried about the "very much still-speculative proposal", given the dynamics of the various market segments.

He said VIPs were unlikely to be affected because they "typically aren't going to be carrying a significant amount of cash back and forth". In the premium mass market, he said, people would still be able to withdraw large amounts of cash at ATMs.